Mortgage Fraudhttp://www.businessinsider.com/category/mortgage-fraud
en-usSun, 02 Aug 2015 15:18:08 -0400Sun, 02 Aug 2015 15:18:08 -0400The latest news on Mortgage Fraud from Business Insiderhttp://static3.businessinsider.com/assets/images/bilogo-250x36-wide-rev.pngBusiness Insiderhttp://www.businessinsider.com
http://www.businessinsider.com/r-nomura-rbs-must-pay-806-million-in-mortgage-bond-case-us-judge-2015-5Two major banks ordered to pay Fannie Mae and Freddie Mac $806 millionhttp://www.businessinsider.com/r-nomura-rbs-must-pay-806-million-in-mortgage-bond-case-us-judge-2015-5
Fri, 15 May 2015 19:16:00 -0400Nate Raymond
<p><img style="float:right;" src="http://static3.businessinsider.com/image/555677135afbd323178b4567-450-300/nomura-rbs-must-pay-806-million-in-mortgage-bond-case-us-judge.jpg" border="0" alt="People walk past a branch of The Royal Bank of Scotland (RBS) in central London August 27, 2014. REUTERS/Toby Melville "></p><p>NEW YORK (Reuters) - A U.S. judge on Friday ordered&nbsp;Nomura Holdings&nbsp;and&nbsp;Royal Bank of Scotland&nbsp;to pay a collective $806 million for making false statements in selling mortgage-backed securities to Fannie Mae and Freddie Mac.</p>
<p>U.S. District Judge&nbsp;Denise Cote&nbsp;in Manhattan entered the judgment after finding the banks liable on Monday following a non-jury bench trial in a lawsuit by the&nbsp;Federal Housing Finance Agency&nbsp;over securities sold ahead of the 2008 financial crisis.</p>
<p>Under the order, Fannie Mae will receive $26.6 million while Freddie Mac will be paid $779.4 million by the two firms.</p>
<p>The damages amount was in line with an estimate given to Reuters on Tuesday by a lawyer for the FHFA, which has acted as conservator for Fannie and Freddie since their 2008 government takeover.</p>
<p>While RBS was ordered to pay hundreds of millions of dollars, Nomura has agreed to an indemnify the bank, a person familiar with the matter said.</p>
<p>The banks also under the order will receive back the mortgage bonds the FHFA sued over, which a defense expert witness at trial estimated were worth $434 million to $479 million as of March 26.</p>
<p>Nomura in a statement said it will appeal, saying it "takes this situation very seriously and strongly disagrees with the outcome of the case."</p>
<p><img src="http://static5.businessinsider.com/image/51780d546bb3f77c4800000c-1200-750/ap070502073193.jpg" border="0" alt="fannie mae"></p>
<p>Representatives for the FHFA and RBS did not immediately respond to requests for comment.</p>
<p>The lawsuit was the first of 18 to reach trial filed by the regulator in 2011 over some $200 billion in mortgage-backed securities that various banks sold to Fannie Mae and Freddie Mac.</p>
<p>The FHFA has obtained nearly $17.9 billion in settlements from institutions that include Bank of America, JPMorgan Chase and&nbsp;Deutsche Bank AG. Those deals followed adverse rulings by Cote.</p>
<p>Following a non-jury trial, Cote ruled against Nomura, which sponsored $2 billion of securities sold to Fannie and Freddie, and RBS, which underwrote four of the deals.</p>
<p>"The offering documents did not correctly describe the mortgage loans," Cote wrote. "The magnitude of falsity, conservatively measured, is enormous."</p>
<p>The case is&nbsp;Federal Housing Finance Agency&nbsp;v&nbsp;Nomura Holding America Inc,&nbsp;U.S. District Court, Southern District of New York, No. 11-06201.</p>
<p>(Editing by Diane Craft)</p><p><a href="http://www.businessinsider.com/r-nomura-rbs-must-pay-806-million-in-mortgage-bond-case-us-judge-2015-5#comments">Join the conversation about this story &#187;</a></p> <p>NOW WATCH: <a href="http://www.businessinsider.com/merriam-websters-most-looked-up-word-pragmatic-2015-4">Here's the most looked-up word in the Merriam-Webster dictionary</a></p> http://www.businessinsider.com/ocwen-stock-crashes-january-13-2015-1Mortgage Servicer Ocwen Financial Is Crashing (OCN)http://www.businessinsider.com/ocwen-stock-crashes-january-13-2015-1
Tue, 13 Jan 2015 15:11:41 -0500Myles Udland
<p><img style="float:right;" src="http://static5.businessinsider.com/image/54b57beaecad04584655d9a6-806-604/oxford-shark-house-012-3.jpg" border="0" alt="Oxford shark house 012"></p><p>Shares of mortgage servicing company Ocwen are crashing on Tuesday after a <a href="http://www.latimes.com/business/la-fi-ocwen-mortgage-license-20150113-story.html">report in The Los Angeles Times</a> said California is looking to suspend the company's mortgage license in the state.&nbsp;</p>
<p>In afternoon trade on Tuesday, Ocwen shares were down as much as 38% bringing the stock's losses over the last year to about 85% in what has been a complete disaster of a year for the company.&nbsp;</p>
<p>Here's the <a href="http://www.latimes.com/business/la-fi-ocwen-mortgage-license-20150113-story.html">LA Times on Tuesday</a>:</p>
<p style="padding-left: 60px;">California's action accuses Ocwen of defying requests for information by the California Department of Business Oversight, which licenses nonbank mortgage lenders and providers of collection and foreclosure services.</p>
<p style="padding-left: 60px;">Ocwen, which specializes in handling troubled home loans, is the largest mortgage servicer not affiliated with a bank and the nation's fourth-largest servicer overall.</p>
<p style="padding-left: 60px;">Losing a California license would mean that Ocwen, based in Atlanta, would have to sell its rights to handle bill collection and foreclosures in the state, said Tom Dresslar, spokesman for the state agency.</p>
<p>The Times' report added that Ocwen counts California as its largest source of business.</p>
<p>Back in October, shares of Ocwen crashed after regulators in New York sent a letter to the company saying it uncovered "serious issues" with some of Ocwen's systems and controls, including the uncovering of backdated letters that saw borrowers unwitting face foreclosure.&nbsp;</p>
<p>In December, <a href="http://shareholders.ocwen.com/releasedetail.cfm?ReleaseID=888667">Ocwen agreed</a> to pay a $100 million settlement to the state of New York.&nbsp;</p>
<p>The massive drop in Ocwen shares of Tuesday brings the stock's loss to more than 85% over the last year, giving up more than all of the gains the company enjoyed as the stock rallied from around $14 per share at the beginning of 2012 to just less than $60 per share at its October 2013 peak.&nbsp;</p>
<p>Ocwen did not respond to Business Insider's request for comment.&nbsp;</p>
<p>Here's the last year of trade in Ocwen shares, which has been a total disaster.&nbsp;</p>
<p><img src="http://static3.businessinsider.com/image/54b5710369beddc641c1aa23-842-440/screen shot 2015-01-13 at 2.23.58 pm.png" border="0" alt="OCN 1.13"></p><p><a href="http://www.businessinsider.com/ocwen-stock-crashes-january-13-2015-1#comments">Join the conversation about this story &#187;</a></p> http://www.businessinsider.com/ocwen-financial-falls-after-lawsky-letter-october-21-2014-10Mortgage Company Ocwen Financial Is Crashing After New York Regulator Says It Uncovered 'Serious Issues' (OCN)http://www.businessinsider.com/ocwen-financial-falls-after-lawsky-letter-october-21-2014-10
Tue, 21 Oct 2014 13:12:00 -0400Myles Udland
<p>Shares of Ocwen Financial are crashing on Tuesday after Benjamin Lawsky, the Superintendent of the New York Department of Financial Services, <a href="http://www.dfs.ny.gov/about/press2014/pr141021-ltr.pdf">sent the mortgage company a letter</a> that said his office had uncovered "serious issues" with the company's "systems and controls."</p>
<p>In afternoon trade, Ocwen shares were down as much 24% and had been halted at least twice because of volatility. </p>
<p>In his letter, Lawsky wrote that his office uncovered backdating of potentially "hundreds of thousands of letters to borrowers, likely causing them significant harm."</p>
<p>Lawsky's letter outlines backdating that created situations in which borrowers facing foreclosure received letters that specified a date to cure their default that had passed months prior to their actual receipt of the letter. </p>
<p>"The existence and pervasiveness of these issues raises critical questions about Ocwen's ability to perform its core function of servicing loans," Lawsky writes. "Even worse, Ocwen did nothing to investigate or address the backdating issue when an employee questioned the accuracy of Ocwen's letter dating processes and alerted the company's Vice President of Compliance ... Ocwen's indifference to such a serious matter demonstrates a troubling corporate culture that disregards the needs to struggling borrowers."</p>
<p><em>(1:40 p.m. ET update)</em></p>
<p>In an emailed statement to Business Insider, an Ocwen spokesman said:</p>
<p style="padding-left: 60px;"><span style="font-size: 15px; line-height: 1.5em;">We deeply regret the inconvenience to borrowers who received improperly dated letters as a result of errors in our correspondence systems. As always, our goal is to avoid foreclosure. In the case of the 283 borrowers in New York who received letters with incorrect dates, 281 are currently borrowers with us. We are continuing to review the rest of the cases.</span></p>
<p style="padding-left: 60px;"><span style="font-size: 15px; line-height: 1.5em;">We believe that we have resolved the letter dating issues that we have identified to date, and we continue our investigation as to whether there are additional letter dating issues that need to be resolved. We are working with the monitor on these issues.</span></p>
<p style="padding-left: 60px;"><span style="font-size: 15px; line-height: 1.5em;">We are working with and fully cooperating with DFS and monitors to address their concerns</span></p>
<p>Here's the ugly chart of Ocwen shares on Tuesday.</p>
<p><img src="http://static1.businessinsider.com/image/544692a76da811e35332a677-976-253/screen%20shot%202014-10-21%20at%201.06.23%20pm.png" border="0" alt="OCN 10/21"></p>
<p>And here's the full letter from Ocwen.</p>
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<p><em>More to come ...</em></p><p><a href="http://www.businessinsider.com/ocwen-financial-falls-after-lawsky-letter-october-21-2014-10#comments">Join the conversation about this story &#187;</a></p> http://www.businessinsider.com/ex-mortgage-mogul-lee-farkus-2014-3The Only CEO Prosecuted For The Mortgage Crisis Is Someone You've Never Heard Of, And He Feels Like A 'Zombie' In Prisonhttp://www.businessinsider.com/ex-mortgage-mogul-lee-farkus-2014-3
Thu, 20 Mar 2014 15:41:00 -0400Amanda Macias
<p><a href="http://topics.wsj.com/person/F/Lee-Farkas/5402" data-ls-seen="1"><img style="float:right;" src="http://static3.businessinsider.com/image/5329ab5b69bedd446bf624b5-800-/screen%20shot%202014-03-19%20at%2010.32.38%20am.png" border="0" alt="Lee Farkas" width="800" />Lee Farkas</a>, 61,&nbsp;<span>hid billions of dollars through phony accounting and triple-selling mortgages to various financial institutions.</span></p>
<p><span>He is serving a 30-year prison sentence at Butner Federal Penitentiary in North Carolina and supposedly withering away.&nbsp;</span></p>
<p>Farkas, who says he is lonely and suffering from depression said, "You're not really alive in here, you're a zombie&mdash;just a body walking around, eating, sleeping and being yelled at," <a href="http://online.wsj.com/news/articles/SB10001424052702303287804579445813343137266?mg=reno64-wsj&amp;url=http%3A%2F%2Fonline.wsj.com%2Farticle%2FSB10001424052702303287804579445813343137266.html" target="_blank">the WSJ reports</a>.&nbsp;</p>
<p>Farkas' story was featured in <a href="http://www.dailymotion.com/video/xx7glw_american-greed-financial-home-invasion_news" target="_blank">CNBC's series "American Greed"</a>&nbsp;and, according to the documentary, this is how it all went down.</p>
<p>In 1991, completely broke and with no formal training in finance, Farkas bought a small mortgage company called <span>Taylor, Bean &amp; Whitaker with <span>$75,000 that&nbsp;</span>he had borrowed&nbsp;</span><span>from a friend.&nbsp;</span><span style="line-height: 1.5em;">Within 10 years, TBW was easily processing more than 6,000 mortgages a year, and the company became one of the&nbsp;</span><span style="line-height: 1.5em;">nation's top mortgage lenders during housing-bubble inflation.</span></p>
<p><span><span>Farkas manufactured phony&nbsp;<span>mortgages while looting his own company into&nbsp;<span>debt. He&nbsp;<span>misappropriated nearly $38.5 million to finance a lavish lifestyle with several homes, vintage cars, and a private jet, <a href="http://online.wsj.com/news/articles/SB10001424052702303287804579445813343137266?mg=reno64-wsj&amp;url=http%3A%2F%2Fonline.wsj.com%2Farticle%2FSB10001424052702303287804579445813343137266.html" target="_blank">the WSJ reports</a><span>.</span><br /></span></span></span></span></span></p>
<p><span><span>Catherine Kissick, <span>Farkas' partner in crime and&nbsp;</span>senior vice president of</span>&nbsp;Alabama-based Colonial Bank, <a href="http://www.wjla.com/articles/2011/06/catherine-kissick-former-colonial-bank-executive-sentenced-to-8-years-in-prison-62457.html" target="_blank">swept massive funds into TBW's accounts</a>&nbsp;to cover up</span><span style="line-height: 1.5em;">&nbsp;a staggering accumulated deficit.&nbsp;</span></p>
<p><span><span><span>Farkas and six co-conspirators were responsible for one of the biggest fraud schemes to emerge from the housing crisis and the sixth-largest bank failure in American history.<img class="center" src="http://static3.businessinsider.com/image/5329ab1d6da811ca10b8ed72-1200-632/screen%20shot%202014-03-19%20at%2010.33.22%20am.png" border="0" alt="Lee Farkas with his jet" width="800" /></span></span></span></p>
<p><span style="line-height: 1.5em;"><span>Farkas' trial lasted less than three weeks and, on April 19, 2011, he was found guilty of<span>&nbsp;14 counts of conspiracy and fraud, all the while refusing to admit to his crime.<br class="Apple-interchange-newline" /><img style="float:right;" src="http://static1.businessinsider.com/image/5329bc99ecad04ad11df3c0a-1200-632/screen%20shot%202014-03-19%20at%2011.48.40%20am.png" border="0" alt="lee farkas court" width="800" /></span></span></span></p>
<p><span style="line-height: 1.5em;">He was <a href="http://dealbook.nytimes.com/2011/06/30/mortgage-executive-receives-30-year-sentence/" target="_blank">sentenced to 30 years in prison</a> by&nbsp;</span><span style="line-height: 1.5em;">District Court Judge Leonie Brinkema who later criticized Farkas's lack of remorse, saying his only regret was "getting caught."&nbsp;<span>Farkas and six others were ordered to pay a total of about $3.5 billion in restitution.</span></span></p>
<p><span style="line-height: 1.5em;">Farkas is scheduled for release in 2041, when he will be 88 years old.</span></p><p><a href="http://www.businessinsider.com/ex-mortgage-mogul-lee-farkus-2014-3#comments">Join the conversation about this story &#187;</a></p> http://www.businessinsider.com/new-wall-street-lawsuits-in-2014-2013-12ATTORNEY GENERAL HOLDER: Wall Street Should Brace For Another Round Of Lawsuits Next Yearhttp://www.businessinsider.com/new-wall-street-lawsuits-in-2014-2013-12
Wed, 04 Dec 2013 13:32:00 -0500David Ingram
<p><img style="float:right;" src="http://static3.businessinsider.com/image/529f73f7eab8ea4d3958f3fc-480-/eric-holder-13.jpg" border="0" alt="Eric Holder" width="480" /></p><p>WASHINGTON (Reuters) - The U.S. Justice Department plans to bring civil mortgage fraud cases against several financial institutions early in 2014, using as a template the case that ended last month in JPMorgan Chase &amp; Co's $13 billion settlement, U.S. Attorney General Eric Holder said on Wednesday.</p>
<p>In an interview with Reuters, Holder would not say which companies or how many could face lawsuits but said the Justice Department was in contact with them and it was hard to say whether the talks would lead to settlements.</p>
<p>"We have a number of investigations that are coming to a head at the same time," he said. "It is my hope that the next round of these cases will be filed soon after the new year."</p>
<p>JPMorgan, the largest U.S. bank, agreed last month to pay $13 billion to end a series of government investigations into its marketing and sale of mortgage-backed securities.</p>
<p>The settlement had four elements that were important to the government, Holder said: the resolution of civil fraud allegations, the ability of prosecutors to pursue criminal charges if warranted, a statement of facts describing the bank's conduct and help for consumers hurt in the financial crisis.</p>
<p>"Those four things I think comprise what we think of as a template for the resolution of these other matters as they're brought," he said.</p>
<p>Holder said it was difficult to predict how new cases will "ultimately be resolved, at least at this point - whether there will be a resolution or whether we will actually be filing something in the absence of a resolution."</p>
<p>(Editing by Howard Goller and Matthew Lewis)</p><p><a href="http://www.businessinsider.com/new-wall-street-lawsuits-in-2014-2013-12#comments">Join the conversation about this story &#187;</a></p> http://www.businessinsider.com/homeowner-relief-in-jpm-settlement-2013-11Here's How Some Homeowners Will Benefit From JPMorgan's Big Settlementhttp://www.businessinsider.com/homeowner-relief-in-jpm-settlement-2013-11
Tue, 19 Nov 2013 15:41:02 -0500Linette Lopez
<p><img style="float:right;" src="http://static3.businessinsider.com/image/528bc6ac69beddad1b4ad03a-480-/jamie-dimon-24.jpg" border="0" alt="jamie dimon" width="480" /></p><p>Of the $13 billion that JP Morgan will pay to settle mortgage fraud charges, $4 billion will go to distressed homeowners.</p>
<p>More specifically, $1.5 billion will go specifically to JPM, Washington Mutual, or Bear Sterns borrowers that are under water &mdash; the value of their homes is less than that of their mortgages.</p>
<p>The rest of the $4 billion can be used in a variety of ways for customers or communities impacted by the crisis &mdash; which ones, however, has yet to be worked out, <a href="http://www.washingtonpost.com/business/economy/jpmorgans-13-billion-settlement-to-include-deadline-for-assisting-homeowners/2013/11/18/919695ea-508b-11e3-a7f0-b790929232e1_story.html">according to WaPo.</a></p>
<p>JP Morgan will have to hire an independant monitor to make sure that all this goes down nice and clean.</p>
<p>Options for additional relief include lowering interest payments on existing loans, or originating brand new loans that JPM will keep on its books (not sell to investors). $300-$500 million of settlement should go to restructuring mortgages, according to the settlement.</p>
<p>New York state alone will get $1 billion of the settlement, <span> including $613 million in cash and approximately $400 million in consumer relief, <a href="http://www.businessinsider.com/jpmorgan-13-billion-mortgage-settlement-2013-11#ixzz2l7ly91uh">according to the New York Attorney General's office.</a></span></p>
<p><span><span>&ldquo;Since my first day in office, I have insisted that there must be accountability for the misconduct that led to the crash of the housing market and the collapse of the American economy,&rdquo; said&nbsp;Attorney General Schneiderman, co-chair of the RMBS working group.<strong>&nbsp;</strong>&ldquo;This historic deal, which will bring long-overdue relief to homeowners around the country and across New York, is exactly what our working group was created to do. We refused to allow systemic frauds that harmed so many New York homeowners and investors to simply be forgotten, and as a result we&rsquo;ve won a major victory today in the fight to hold those who caused the financial crisis accountable.&rdquo;</span></span></p>
<p><span><span><a href="http://online.wsj.com/news/articles/SB20001424052702303985504579206320177281580">According to the WSJ,</a> this consumer relief portion was a sticking point in settlement talks.</span></span></p>
<p>If JPM doesn't pay this money out by 2016, JPMorgan has to pay an amount equal to the unexpended funds either to the government or to a third party designated by the government, like a non-profit.</p>
<p>Of course, this doesn't end JP Morgan's legal troubles. They still have to clear up issues surrounding their business convicted Ponzi schemer Bernie Madoff, and address questions about its hiring of family members connected to the ruling Communist party in China.</p><p><a href="http://www.businessinsider.com/homeowner-relief-in-jpm-settlement-2013-11#comments">Join the conversation about this story &#187;</a></p> http://www.businessinsider.com/jp-morgan-settlement-tax-deductible-2013-11People Are Starting To Get Really Angry That The Huge JP Morgan Settlement Is Tax Deductiblehttp://www.businessinsider.com/jp-morgan-settlement-tax-deductible-2013-11
Wed, 06 Nov 2013 10:36:00 -0500Linette Lopez
<p><img style="float:right;" src="http://static1.businessinsider.com/image/527a5d9e6bb3f79d7b9ab765-480-/elizabeth-warren-19.jpg" border="0" alt="elizabeth warren " width="480" /></p><p>JP Morgan's potential $13 billion settlement with the government hasn't been finalized yet, but already politicians and public interest groups are crying foul because up to $9 billion of the settlement is tax deductible.</p>
<p>That means the bank could write $3 billion off their corporate tax bill as a business expense, according to Americans for Tax Fairness and the U.S. PIRG, the federation of state Public Interest Research Groups.</p>
<p>On Monday, Americans for Tax Fairness and the U.S. PIRG presented Congress with a 160,000 signature petition asking the Justice Department to add a provision to the settlement that would stop this from happening, and a bunch of Congressmen have jumped on board, calling U.S. Attorney General Eric Holder to do something.</p>
<p>&ldquo;Taxpayers should not be subsidizing more than $3 billion of JPMorgan&rsquo;s penalties at a time when federal priorities like education, clean energy, infrastructure and other job creating investments are facing budget cuts. This settlement has to be meaningful if it is going to deter future abuses. I join the 150,000 people today who are urging Attorney General Holder to stand firm and fight for taxpayers and middle class families,&rdquo; said Senator Mazie K. Hirono (D-HI).</p>
<p>Hirono is the lead signatory on a letter sent to the Justice Department by five Senators &mdash; Elizabeth Warren (D-MA), Bill Nelson (D-FL), Martin Heinrich (D-NM), and Sheldon Whitehouse (D-RI) &mdash; urging the DOJ to "ensure the final settlement is clear about the tax treatment of the entire settlement amount and explicitly prohibits the tax deductibility of such payments.&rdquo;</p>
<p>And lest you think this idea has no bipartisan support, Senator Chuck Grassley (R-IA) is in the mix too.</p>
<p>&ldquo;A settlement has to mean something or it won&rsquo;t have the deterrent effect it&rsquo;s supposed to have,&rdquo; says Grassley. &ldquo;Federal agencies should do everything they can in negotiating settlements to limit deductions.&rdquo;</p>
<p>At the same time, Congressman Peter Welch (D-VT) has introduced a bill to the House that would end the corporate tax deductibility of all legal settlements, it's called <a href="http://beta.congress.gov/bill/113th-congress/house-bill/3445">The Stop Deducting Damages Act(HR 3445).</a></p>
<p>He also sent a letter to Jamie Dimon &mdash; here's a snippet <a href="http://www.welch.house.gov/press-releases/welch-introduces-bill-blocking-jp-morgan-from-writing-off-wall-street-meltdown-penalty/">(you can read it in full here):</a></p>
<p style="padding-left: 30px;">It was the taxpayer who initially funded the bailout of Wall Street. It was the taxpayer who continues to endure the consequences of the worst recession since the Great Depression. The taxpayer should not, therefore, be required to contribute a nickel towards the fines imposed for conduct that got America into this mess in the first place.</p>
<p>So in case you're wondering why it's taking JP Morgan so long to cough up $13 billion &mdash; this could be one of the snags.</p><p><a href="http://www.businessinsider.com/jp-morgan-settlement-tax-deductible-2013-11#comments">Join the conversation about this story &#187;</a></p> http://www.businessinsider.com/13-billion-fine-means-nothing-to-jpm-2013-10Why A $13 Billion Fine Means Almost Nothing To JP Morgan And Its Investorshttp://www.businessinsider.com/13-billion-fine-means-nothing-to-jpm-2013-10
Mon, 21 Oct 2013 15:48:28 -0400Linette Lopez
<p><img style="float:right;" src="http://static3.businessinsider.com/image/52657bacecad04831abaa39d-480-/jamie-dimon-from-reuters-3.jpg" border="0" alt="Jamie Dimon from Reuters" width="480" /></p><p>The news of the day on Wall Street is the record-setting <a href="http://www.businessinsider.com/jpmorgan-could-still-face-criminal-charges-2013-10">$13 billion settlement</a> JP Morgan is reportedly working out with the U.S. government in order to settle a civil investigation into mortgage-backed securities created before the housing market collapse in 2008.</p>
<p>It's a staggering number. In fact, it sets the record for <a href="http://www.businessinsider.com/jpmorgan-could-still-face-criminal-charges-2013-10">the largest civil fine ever levied</a> against a bank. It's half of what JPM earned in 2012.</p>
<p>It's also no sweat for JP Morgan.</p>
<p>You may notice that the bank's stock seems totally un-phased by the news of a $13 billion pay-out (it's down only 0.1% today). Its market cap is only down $10 billion from its 52-week high of $214 billion.&nbsp; In other words, this is nothing for its investors.</p>
<p>That's because legal costs, even ones as huge as this one, have already been priced in &mdash; JPM CEO Jamie Dimon prepared us for this news almost two weeks ago, when the bank reported its first quarterly net loss under his reign. In bank's third quarter earnings announcement, management said the bank dug into its coffers and found $23 billion to put aside to deal with the over a dozen probes into its activities being conducted by regulators around the world.</p>
<p>On the earnings call, <a href="http://www.businessinsider.com/jpm-legal-loss-exceeds-bank-expectations-2013-10#ixzz2iNv7rmoY">CFO Marianne Lake said</a> the bank was in a "highly charged and very volatile" legal environment, "far beyond what we reasonably expected... even a few weeks ago."</p>
<p>And it's not over. This massive settlement does nothing to stop the government from continuing its criminal investigation into JP Morgan's mortgage business. And while some of the mortgages backed securities in question in this civil probe were legacies from Washington Mutual and Bear Stearns &mdash; two banks JPM picked up during the financial crisis &mdash; the MBS in the criminal probe were originated at JPM, according to <a href="http://www.bloomberg.com/news/2013-10-19/jpmorgan-said-to-have-reached-13-billion-u-s-accord.html\&quot; data-mce-href=">Bloomberg's Dawn Kopecki.</a></p>
<p>So Lake was being as precise as she could be when she said on the call that the deployment of JPM's legal funds will be "lumpy."</p>
<p>We don't know when the next fine will be handed down to JPM, and we don't know where it will come from. But as of right now, we do know that the bank still has $10 billion to deal with legal issues.</p>
<p>As that number dwindles, maybe investors will start to react. Until then, JP Morgan isn't shocking anyone, least of all itself.</p><p><a href="http://www.businessinsider.com/13-billion-fine-means-nothing-to-jpm-2013-10#comments">Join the conversation about this story &#187;</a></p> http://www.businessinsider.com/jpmorgan-could-pay-11b-settlement-2013-9REPORT: JPMorgan Could Shell Out Up To $11 Billion For A National Mortgage-Backed Security Settlementhttp://www.businessinsider.com/jpmorgan-could-pay-11b-settlement-2013-9
Wed, 25 Sep 2013 14:25:09 -0400Linette Lopez
<p><img style="float:right;" src="http://static6.businessinsider.com/image/5243298769bedd8a136cd2cf-480-/jamie-dimon-24.png" border="0" alt="jamie dimon" width="480" /></p><p>And the hits just keep on coming... this one's especially hard.</p>
<p>The <a href="http://online.wsj.com/article/APdbf2bd14494649e6857496bee776a152.html">Associated Press reports</a> that JP Morgan could pay out up to $11 billion &mdash; $4 billion in customer relief and $7 billion in cash &mdash; in a national settlement related to mortgage backed securities.</p>
<p>Sources close to the situation told the AP that the Justice Department is taking the lead on this, but individual states will likely get a piece of this pie as well.</p><p><a href="http://www.businessinsider.com/jpmorgan-could-pay-11b-settlement-2013-9#comments">Join the conversation about this story &#187;</a></p> http://www.businessinsider.com/lawsuit-claims-bofa-rewarded-employees-for-foreclosures-2013-6Former Bank Of America Employees Say They Got Cash And Gifts For Falsifying Mortgage Loans In New Lawsuithttp://www.businessinsider.com/lawsuit-claims-bofa-rewarded-employees-for-foreclosures-2013-6
Fri, 14 Jun 2013 15:21:20 -0400Linette Lopez
<p><img style="float:right;" src="http://static4.businessinsider.com/image/51bb6bff69bedd6738000026-480-/bank-of-america-16.jpg" border="0" alt="Bank of America" width="480" /></p><p>Employees at Bank of America were given cash bonuses and gifts for meeting quotas of mortgage holders sent into foreclosure, claims Simone Gordon, a former employee who has filed a lawsuit in Boston.</p>
<p>Bloomberg reports that Bank of America allegedly improperly disqualified applicants to the Home Affordable Modification Program, or HAMP.</p>
<p>From Bloomberg:</p>
<p style="padding-left: 30px;">&ldquo;We were regularly drilled that it was our job to maximize fees for the bank by fostering and extending delay of the HAMP modification process by any means we could,&rdquo; Gordon said. Managers instructed staff to &ldquo;delay modifications by telling homeowners who called in that their documents were &lsquo;under review,&rsquo; when in fact, there had been no review,&rdquo; she said. The bank has denied the plaintiffs&rsquo; allegations.</p>
<p>Bank of America's attorney has said that these characterizations of their loan practices are "false." The bank unsuccessfully tried to dismiss these claims in 2011.</p>
<p>From Bloomberg:</p>
<p style="padding-left: 30px;">Another former employee, Theresa Terrelonge, said loan officers were given restaurant gift cards and $25 cash awards for denying loan applications. The incentives moved workers to improperly reject applicants, Terrelonge said in a May 15 statement.</p>
<p style="padding-left: 30px;">&ldquo;I witnessed employees and managers change and falsify information in the systems of record, and remove documents from homeowners&rsquo; files to make the account appear ineligible for a loan modification,&rdquo; said Terrelonge, a loan servicing representative. This allowed managers to meet quotas for closed cases, she said.</p>
<p>Loan officers that put at least 10 customers into foreclosure got $500 bonuses.</p>
<p>Bank of America has already spent $45 billion on claims stemming from the foreclosure crisis, we'll see how this one goes.</p><p><a href="http://www.businessinsider.com/lawsuit-claims-bofa-rewarded-employees-for-foreclosures-2013-6#comments">Join the conversation about this story &#187;</a></p> http://www.businessinsider.com/feds-send-bad-mortgage-checks-again-2013-5After Bouncing Checks, Now The Government Is Sending Mortgage Settlement Checks In The Wrong Amountshttp://www.businessinsider.com/feds-send-bad-mortgage-checks-again-2013-5
Thu, 09 May 2013 09:39:47 -0400Rob Wile
<p><img style="float:right;" src="http://static1.businessinsider.com/image/518ba4cdecad04164a000006-400-/fail-meter-2.jpg" border="0" alt="fail meter" width="400" /></p><p>First the checks <a href="http://www.businessinsider.com/mortgage-relief-checks-bounced-2013-4">bounced</a>.&nbsp;</p>
<p>Now, the <a class="hidden_link" href="http://www.businessinsider.com/blackboard/new-york-times">New York Times</a> says some mortgage relief checks sent to distressed homeowners<a href="http://dealbook.nytimes.com/2013/05/08/in-latest-foreclosure-glitch-some-checks-come-up-short/"> contain the wrong amounts.</a></p>
<p>The blame appears to fall on Rust Consulting, the contractor hired by the feds to distribute the checks.</p>
<p>From the Times:</p>
<p style="padding-left: 30px;"><span>In recent days, according to officials briefed on the matter, Rust Consulting issued nearly 100,000 checks for less than the homeowners were owed. The mistake potentially cheated consumers out of millions of dollars they were owed under a deal reached between the government and the nation&rsquo;s biggest banks.</span></p>
<p style="padding-left: 30px;">Federal regulators ordered Rust to fix its mistake. And in a statement, Rust said late Wednesday that it had &ldquo;corrected the error and plans to mail supplemental checks to affected borrowers as soon as May 17.&rdquo; It attributed the mistake to a &ldquo;clerical error.&rdquo;</p>
<p>Here's a brutal quote about the matter from one homeowner married to a veteran:</p>
<p style="padding-left: 30px;"><span>&ldquo;First we are wrongfully tossed out of our home while serving this country and then we get basically no money.&rdquo;&nbsp;</span></p>
<p>The checks are part of a $3.6 billion settlement deal regulators struck with banks. &nbsp;</p>
<p>The Times' story goes a lot more in depth into how heavily Rust is embedded into government services. <a href="http://dealbook.nytimes.com/2013/05/08/in-latest-foreclosure-glitch-some-checks-come-up-short/">Check out the full story here &gt;</a></p><p><a href="http://www.businessinsider.com/feds-send-bad-mortgage-checks-again-2013-5#comments">Join the conversation about this story &#187;</a></p> http://www.businessinsider.com/floyd-abrams-on-cnbc-2013-2S&P Lawyer Says That DOJ Investigation Into It Accelerated After The 2011 Downgradehttp://www.businessinsider.com/floyd-abrams-on-cnbc-2013-2
Tue, 05 Feb 2013 11:18:00 -0500Linette Lopez
<p>Late last night the Department of Justice filed a case against rating agency Standard and Poor's for allegedly defrauding investors by knowingly giving toxic mortgage backed securities positive ratings.</p>
<p>You can check out <a href="http://www.businessinsider.com/goverment-complaint-against-sp-2013-2">highlights from the complaint</a> (including an S&amp;P parody of The Talking Heads' 'Burning Down the House' <a href="http://www.businessinsider.com/goverment-complaint-against-sp-2013-2">here).</a></p>
<p>The government poured over 20 million S&amp;P e-mails and instant message conversations to construct this case, and it's attorney Floyd Abrams, of Cahill Gordon &amp; Reindel who will have to answer for all of them in the company's defense.</p>
<p>He started (publicly) <a href="http://video.cnbc.com/gallery/?play=1&amp;video=3000145832">this morning on CNBC.</a></p>
<p>Abrams' argument against the government's case is simple &mdash; S&amp;P did not knowingly deceive investors because they actually believed their ratings.</p>
<p style="padding-left: 30px;">"...the ratings that were issued were believed by the people that issued them," he told CNBC's David Faber. "The government has to show that S&amp;P literally disbelieved their ratings."</p>
<p>Abrams went on to say that it wasn't just S&amp;P that believed the housing market was solid, other ratings agencies did too (after all, two had to agree on a product's rating for that rating to stick).</p>
<p>Not only that, but the Federal Reserve and then-Treasury Secretary Hank Paulson were bullish on housing as well, Abrams explained.</p>
<p>From CNBC:</p>
<p style="padding-left: 30px;">"The government read 20 million pages of e-mails and you the see best they could call out of it... an organization trying to come up with answers when answers were hard to come by."</p>
<p>Faber asked Abrams if the U.S. government may be going after S&amp;P (and not other ratings agencies like Moody's), because of S&amp;P's downgrade of the U.S. government's bonds. It's a sinister idea, and Abrams didn't buy it... completely.</p>
<p style="padding-left: 30px;">"Is it true that after the down-grade the intensity of this investigation increased? Yeah, but we don't know why... certainly no on in government has come to me and said it."</p>
<p>Pretty interesting stuff. If you're waiting for the trial, though, it'll be years away. In the meantime, Abrams will be trying to keep this case out of Court at all.</p>
<p>Watch the full video below:</p>
<p><object id="cnbcplayer" classid="clsid:D27CDB6E-AE6D-11cf-96B8-444553540000" codebase="http://download.macromedia.com/pub/shockwave/cabs/flash/swflash.cab#version=9,0,0,0" width="400" height="380"><param name="type" value="application/x-shockwave-flash" /><param name="allowfullscreen" value="true" /><param name="allowscriptaccess" value="always" /><param name="quality" value="best" /><param name="scale" value="noscale" /><param name="wmode" value="transparent" /><param name="bgcolor" value="#000000" /><param name="salign" value="lt" /><param name="flashVars" value="startTime=000" /><param name="flashVars" value="endTime=000" /><param name="movie" value="http://plus.cnbc.com/rssvideosearch/action/player/id/3000145832/code/cnbcplayershare" /><embed name="cnbcplayer" pluginspage="http://www.macromedia.com/go/getflashplayer" allowfullscreen="true" allowscriptaccess="always" bgcolor="#000000" quality="best" wmode="transparent" scale="noscale" salign="lt" src="http://plus.cnbc.com/rssvideosearch/action/player/id/3000145832/code/cnbcplayershare" type="application/x-shockwave-flash" height="380" width="400" /></object></p><p><a href="http://www.businessinsider.com/floyd-abrams-on-cnbc-2013-2#comments">Join the conversation about this story &#187;</a></p> http://www.businessinsider.com/goverment-complaint-against-sp-2013-2Government Sues S&P Over Mortgage Ratings: Says Analyst Wrote A Parody Of 'Burning Down The House'http://www.businessinsider.com/goverment-complaint-against-sp-2013-2
Tue, 05 Feb 2013 10:35:00 -0500Linette Lopez
<p>Even if you're bored of hearing about pre-crisis financial industry shenanigans, the government's complaint against rating agency Standard &amp; Poor's (S&amp;P) is worth your while.</p>
<p>The Justice Department alleges that S&amp;P had full knowledge that the ratings it was stamping on Residential Mortgage Backed Securities (RMBS) were too high, and the DOJ has collected e-mails and instant messages that corroborate that assertion in the most embarrassing and damning way possible.</p>
<p>Analysts even made a fun song about the destruction of the U.S. mortgage market, to the tune of <a href="http://www.youtube.com/watch?v=xNnAvTTaJjM">Talking Heads classic, 'Burning Down The House.'</a></p>
<p>But first, on March 1st 2007, David Tesher, the Managing Director of S&amp;P's Cash CDO (Collateralized Debt Obligation) Group held a meeting in which he explained to analysts that the RMBS market was about to die a grizzly death.</p>
<p>He went on to explain that the issuers of these rates (banks) were trying to close deals as quickly as possible.</p>
<h3><strong>From the complaint (page 68):</strong><br /><img src="http://static1.businessinsider.com/image/51111c8c69beddfe5100000f-620-283/teshermeeting.png" border="0" alt="tesher meeting S&amp;P complaint" width="620" height="283" /></h3>
<p>&nbsp;</p>
<p>After this meeting, two analysts had an instant message exchange lamenting that a market crash would mean a "grumpy" Managing Director and grumpy bankers (page 70):</p>
<p><img src="http://static4.businessinsider.com/image/51111dbcecad04085500001c-535-314/screen shot 2013-02-05 at 9.56.40 am.png" border="0" alt="grumpy S&amp;P complaint" width="585" height="343" /></p>
<p>&nbsp;</p>
<p>Sounds&nbsp; like a bit of an understatement, no? That said, it's not as if analyst were lost on the conflict of interest in rating these instruments and getting paid by the banks they were rating them for. They talked about it amongst themselves.</p>
<p>Here's the famous "it could be structured by cows" and we would rate it line between two analysts in April of 2007 (page 80):</p>
<p><img src="http://static6.businessinsider.com/image/51111ef9eab8eabf34000011-620-320/screen shot 2013-02-05 at 10.01.57 am.png" border="0" alt="cows S&amp;P" /></p>
<p>&nbsp;</p>
<p>At a certain point, the only people these analysts could really commiserate with were the clients that they were rating these securities for &mdash; Wall Street bankers.</p>
<p>Here's a July 2007 conversation between an analyst and his client in which he says that the entire system is completely insane (page 99).</p>
<p><img src="http://static5.businessinsider.com/image/51111f50ecad04ac59000003-533-415/99analyst admission.png" border="0" alt="S&amp;P complaint" width="597" height="464" /></p>
<p>&nbsp;</p>
<p>All this doesn't mean that no one at S&amp;P was having fun, though.</p>
<p>In March of 2007 one analysts (referred to as "Analyst D") wrote a little ditty about the collapse of the mortgage market set to the tune of the Talking Heads Song, 'Burning Down the House.'</p>
<p>Of course, Analyst D was asked to hold off on e-mailing the song (and the attached video performance) but he kindly offered to perform the song in anyone's cubicle upon request.</p>
<p><img src="http://static4.businessinsider.com/image/5111206169bedd7e58000009-526-442/screen shot 2013-02-05 at 10.06.49 am.png" border="0" alt="S&amp;P Burning down the house part 1" width="603" height="506" /></p>
<p><img src="http://static4.businessinsider.com/image/5111207a69bedd695b000014-543-340/screen shot 2013-02-05 at 10.07.01 am.png" border="0" alt="S&amp;P burning down the house complaint" width="610" height="382" /></p>
<p>All singing, all dancing financial collapse. If you have that video, please send it over to Business Insider.</p>
<p>Until then, you can <a href="http://www.youtube.com/watch?v=xNnAvTTaJjM">make do with the original</a> (somehow):</p>
<p><iframe width="420" height="315" frameborder="0" src="http://www.youtube.com/embed/xNnAvTTaJjM"></iframe></p><p><a href="http://www.businessinsider.com/goverment-complaint-against-sp-2013-2#comments">Join the conversation about this story &#187;</a></p> http://www.businessinsider.com/highest-risk-cities-for-mortgage-fraud-2013-1Here Are The Most Dangerous Cities To Take Out A Mortgagehttp://www.businessinsider.com/highest-risk-cities-for-mortgage-fraud-2013-1
Tue, 29 Jan 2013 19:09:08 -0500Credit.com
<p><img style="float:right;" src="http://static6.businessinsider.com/image/5106ddc36bb3f77f6b000005-400-/mortgage-crying-milliken-colorado.jpg" border="0" alt="mortgage, crying, Milliken, Colorado" width="400" /></p><p>The housing market has been improving significantly for nearly a year at this point, but with those upticks in activity across the board in the last several months, it seems that instances of potential fraud also increased.</p>
<p>The total amount of <a href="http://www.krollfactualdata.com/News/Media-Release-" target="_blank">possible mortgage fraud nationwide rose 1.1 percent from July to September 2012</a> from the previous quarter, according to new statistics from Kroll Factual Data.</p>
<p>And while there were increases in every region across the country, these were caused not by low-level jumps in most places, but rather massive leaps in specific metropolitan areas.</p>
<p>For instance, Flint, Michigan, saw an increase in potential mortgage fraud on a quarterly basis of 50.32 percent, by far the largest of any metropolitan statistical area in which at least 1,000 applications were processed in the quarter, the report said.</p>
<p>The next-closest increase for any one city was in Columbia, Missouri, where potential fraud spiked 29.77 percent, and Lancaster, Pennsylvania&rsquo;s jump totaled 28.83 percent. Tacoma, Washington (25.68 percent) and Santa Fe, New Mexico (24.24 percent) rounded out the top five increases.</p>
<div id="rpuCopySelection" style="text-align: left; font-size: 12px; color: black;">
<p>&ldquo;This spike in potential fraud is troubling, coming at the same time the mortgage industry is beginning to turn the corner,&rdquo; said Rob Bazzani, president of Kroll Factual Data.</p>
<p>&ldquo;More importantly, the fact that red flags are rising in every area of the country highlights the continued need for lenders to remain vigilant against fraud. In addition, the new&nbsp;Consumer Financial Protection Bureau&nbsp;restrictions &mdash; whose ultimate goal is to ensure a borrower can repay a mortgage over its entire term &mdash; raise the stakes for lenders to catch fraud or inadvertent errors that might compromise lending decisions or risk buy-back requests.&rdquo;</p>
<p>On the other hand, a number of cities also saw significant declines in potential mortgage fraud, though those declines weren&rsquo;t enough to make up for the surges seen elsewhere, the report said. Champaign-Urbana, Illinois; Bridgeport-Milford, Connecticut; and San Francisco-Oakland, California all saw declines of 18 percent or more, and a number of other cities also came in with drops of more than 17 percent.</p>
<p style="text-align: center;"><img class="size-full wp-image-64331 aligncenter" src="http://ccomwp.wpengine.netdna-cdn.com/wp-content/uploads/2013/01/10cities.jpg" border="0" alt="10 Cities at Highest Risk for Mortgage Fraud" title="10 Cities at Highest Risk for Mortgage Fraud" width="470" height="540" /></p>
<p><span style="color: #000000;">[Featured Products: <a href="http://www.credit.com/loans/mortgage-rates/" target="_blank">Research and Compare Mortgage Rates at Credit.com</a>]</span></p>
<p>Experts say the housing market should continue to recover over the next year at least, as rising prices will urge more sellers into the market, which will in turn meet already-high buyer demand that has been boosted by interest rates hovering at or near record lows.</p>
<span id="curate-us-tag"></span></div><p><strong>SEE ALSO:&nbsp;<a href="http://www.businessinsider.com/the-hottest-neighborhoods-in-america-in-2013-2013-1" >These will be the hottest neighborhoods in America in 2013 ></a></strong></p>
<p><a href="http://www.businessinsider.com/highest-risk-cities-for-mortgage-fraud-2013-1#comments">Join the conversation about this story &#187;</a></p> http://www.businessinsider.com/defending-morgan-stanley-mortgage-trade-2013-1Morgan Stanley's 'Nuclear Holocaust' Trade Isn't As Bad As It's Being Made Out To Behttp://www.businessinsider.com/defending-morgan-stanley-mortgage-trade-2013-1
Wed, 23 Jan 2013 17:41:12 -0500John Carney
<p><img style="float:right;" src="http://static2.businessinsider.com/image/510063afeab8ea3452000007-400-300/toxicassset-2.jpg" border="0" alt="ToxicAssset" width="400" height="300" /></p><p>Jesse Eisinger <strong><a href="http://www.propublica.org/thetrade/item/explosive-charge-morgan-stanley-peddled-security-its-own-employee-called-nu">paints a pretty awful picture</a></strong> of banker misbehavior in his latest Pro Publica column.</p>
<blockquote>
<p>On March 16, 2007, <a class="hidden_link" href="http://www.businessinsider.com/blackboard/morgan-stanley">Morgan Stanley</a> employees working on one of the toxic assets that helped blow up the world economy discussed what to name it. Among the team members' suggestions: "Subprime Meltdown," "Hitman," "Nuclear Holocaust," "Mike Tyson's Punchout," and the simple-yet-direct: "Shitbag."</p>
</blockquote>
<p>These facts have come to light thanks to a lawsuit brought against Morgan Stanley by a Taiwanese bank that invested in a $500 collateralized debt obligation. According to Eisinger, $415 million of the assets backing the CDO, which was actually called Stack 2006-1, wound up being worthless.</p>
<p>Most of those suggested names came from a lawyer at Morgan Stanley named Phillip Blumberg. His emails were released to the public as part of the lawsuit. It's just incredible that this sort of thing still gets sent around in emails just a few years after Wall Street's equity analysts found themselves under fire for, among other things, sending internal emails dissing the stocks their firm's were selling to the public. They'll never learn, I guess.</p>
<div class="group-container">
<div class="group">
<p>Eisinger's <strong><a href="http://data.cnbc.com/quotes/MS" class="inline_quotes" data-gdsid="25929" data-inline-quote-symbol="MS">Morgan Stanley</a></strong> bankers, however, were not selling equities to ordinary retail investors. They were putting together structured financial products that were sold to sophisticated financial institutions. There's a big difference between selling a product to a retail investor and a bank, even a Taiwanese bank.</p>
<p>Or, at least, I think there should be. I get the feeling that Eisinger is not so sure their should be a difference at all. He seems to want to impose the kind of <em><a href="http://www.propublica.org/thetrade/item/explosive-charge-morgan-stanley-peddled-security-its-own-employee-called-nu">financial paternalism</a></em> that we require for retail investors on the institutional end of the market. Actually, he wants to go even further than that. His argument is that investment banks shouldn't sell products if they have taken a position against those products.</p>
<p>"People across the bank understood that the American housing market was in trouble. They took advantage of that knowledge to create and then bet against securities and then also to unload garbage investments on unsuspecting buyers," Eisinger writes.</p>
<p>Eisinger is, of course, correct that people "across the bank" understood the housing market was in trouble. But he implies that this was some kind of secret knowledge, something Morgan Stanley kept hidden from outsiders, which just isn't the case. In fact, at the time Morgan Stanley was openly one of the most bearish shops on Wall Street when it came to housing.</p>
<p>In October 2006, for example, Morgan Stanley issued a note asking <strong><a href="http://www.morganstanley.com/views/gef/archive/2006/20061020-Fri.html">"Is The Housing Recession Over?"</a></strong> Noting that there were glimmers of hope in the market, Morgan Stanley analyst Richard Berner wrote "Call me stubborn, but I still think the housing recession has a long way to go." What's more, Berner issued a warning about mortgages and mortgage lending in particular: "the deterioration in mortgage credit quality is just beginning. We think that lenders are more at risk than are borrowers&hellip;"</p>
<p>A few months earlier, in August 2006, Morgan Stanley chief economist <a class="hidden_link" href="http://www.businessinsider.com/blackboard/stephen-roach">Stephen Roach</a> wrote a note entitled <strong><a href="http://www.morganstanley.com/views/gef/archive/2006/20060825-Fri.html">"Another Post Bubble Shakeout"</a></strong> that described the effects of the bursting of the housing bubble in dire terms."</p>
<p>"Today, America's housing bubble is finally bursting. Is the die cast for another bubble-induced downturn in the US and global economy?" Roach asked. He went on the answer his question in the positive.</p>
<p>These were not secret memos that only Morgan Stanley's bankers saw. They were available on Morgan Stanley's website and emailed out to clients. So while it is true that people "across the bank" had information that America's housing market was in trouble, it's not true that this was some secret.</p>
<p>Should Morgan Stanley have foregone selling credit products linked to the mortgage market because of this view? The Taiwanese lawsuit and Eisinger's article are based on the premise that this is the case.</p>
<p>But that's not how Wall Street operates. Investment banks have typically allowed clients to take the opposite sides of trades, even when they regard one side of the trade as misguided. This is still common practice.</p>
<p>Take, for example, <a href="http://data.cnbc.com/quotes/GS" class="inline_quotes" data-gdsid="19203" data-inline-quote-symbol="GS"><strong>Goldman Sachs</strong></a>. Last quarter, <strong><a href="http://www.cnbc.com/id/100384152" class="inline_asset" data-nodeid="100384152">Goldman made $2.95 billion in fees for underwriting bonds for corporate clients</a></strong>. Goldman's CEO is on record saying it is telling all of its corporate clients to borrow as much as they can now, while rates are at record lows.</p>
<p>But Goldman's CEO has also <strong><a href="http://www.cnbc.com/id/100311917" class="inline_asset" data-nodeid="100311917">warned that bond investors are too complacent about low rates</a></strong>.</p>
<p>"Someone is buying that debt," Blankfein said at a New York Times' Dealbook conference in December. "What's going to happen when growth picks up and interest rates rise? There's going to be a reversal and people will have losses."</p>
<p>I have no doubt that Goldman is trying to position itself so that it will make money when interest rates rise. At that point it will be in exactly the same position as Morgan Stanley in 2007: having positioned itself to make money from the fall in value of bonds it sold to investors.</p>
<p>To put it in Eisinger's terms, people across <a class="hidden_link" href="http://www.businessinsider.com/blackboard/goldman-sachs">Goldman Sachs</a> understand that the American bond market is in trouble. They are taking advantage of that knowledge to create and then bet against securities and then also to unload garbage investments on unsuspecting buyers.</p>
<p>Hopefully they're all smart enough not to call the latest bond deal the a nuclear holocaust.</p>
</div>
</div><p><a href="http://www.businessinsider.com/defending-morgan-stanley-mortgage-trade-2013-1#comments">Join the conversation about this story &#187;</a></p> http://www.businessinsider.com/bank-of-america-fannie-mae-settlement-2013-1Bank Of America Will Pay Fannie Mae A $10 Billion Settlement Over Mortgage Claimshttp://www.businessinsider.com/bank-of-america-fannie-mae-settlement-2013-1
Mon, 07 Jan 2013 08:32:10 -0500Tanya Agrawal
<p><img style="float:right;" src="http://static5.businessinsider.com/image/50eacd66eab8ea801500005c-400-300/bank-of-america-8.jpg" border="0" alt="bank of america" width="400" height="300" /></p><p>(<a class="hidden_link" href="http://www.businessinsider.com/blackboard/reuters">Reuters</a>) - <a class="hidden_link" href="http://www.businessinsider.com/blackboard/bank-of-america">Bank of America</a> Corp said it will pay $3.6 billion to <a class="hidden_link" href="http://www.businessinsider.com/blackboard/fannie-mae">Fannie Mae</a> to settle claims related to residential mortgage loans for the nine years to the end of 2008.</p>
<p>The bank also entered into agreements with Nationstar Mortgage Holdings LLC and Walter Investment Management Corp to sell about $306 billion of residential mortgage servicing rights.</p>
<p>The rights allow banks to earn fees from mortgage investors in exchange for collecting home loan payments from borrowers.</p>
<p>As part of the settlement with Fannie Mae, the bank will repurchase $6.75 billion of residential mortgage loans sold to the government agency.</p>
<p>BofA said the settlement will reduce its fourth-quarter pretax income by about $2.7 billion.</p>
<p>Reuters reported on Friday that the bank was in talks to sell collection rights on $300 billion of mortgages to lessen its exposure to huge losses from its acquisition of Countrywide Financial Corp in 2008.</p>
<p>"Together, these agreements are a significant step in resolving our remaining legacy mortgage issues, further streamlining and simplifying the company and reducing expenses over time," Chief Executive <a class="hidden_link" href="http://www.businessinsider.com/blackboard/brian-moynihan">Brian Moynihan</a> said in a statement.</p>
<p>(Reporting by Tanya Agrawal in Bangalore; Editing by Supriya Kurane)</p>
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<p><img class="nc_pixel" src="http://pixel.newscred.com/px.gif?key=YXJ0aWNsZT1kMjc2YjBhYzYyNTEyMmQ1ZmM2MDZhNTMzNTdkNWZlNiZvd25lcj1lMjI0N2Q1MGI3OThiNGFmYmY4ZWMwMzI0YmY4MDI1YSZub25jZT1jM2JkNjNmNi0xZjc1LTQ2ZmMtODA3Mi0zYzM2NDc5NTM5ZDAmcHVibGlzaGVyPThjMDBmYmVlNjFkNWJjZjBjNjA5MmQ4YjkyZWJiY2Ex" border="0" alt="" width="1" height="1" /></p><p><a href="http://www.businessinsider.com/bank-of-america-fannie-mae-settlement-2013-1#comments">Join the conversation about this story &#187;</a></p> http://www.businessinsider.com/jp-morgan-pay-297-mill-sec-settlement-2012-11JP Morgan Will Pay $297 Million To Settle SEC Mortgage Fraud Lawsuitshttp://www.businessinsider.com/jp-morgan-pay-297-mill-sec-settlement-2012-11
Fri, 16 Nov 2012 13:11:24 -0500Linette Lopez
<p>This just in from <a class="hidden_link" href="http://www.businessinsider.com/blackboard/bloomberg">Bloomberg</a>. <a class="hidden_link" href="http://www.businessinsider.com/blackboard/jp-morgan">JP Morgan</a> will pay $297 million to settle a lawsuits related to mortgage backed securities.</p>
<p>Earlier today <a class="hidden_link" href="http://www.businessinsider.com/blackboard/reuters">Reuters</a> reported that the bank had reached an agreement with the <a class="hidden_link" href="http://www.businessinsider.com/blackboard/sec">SEC</a>, but did not disclose how much JPM would pay.</p>
<p><a href="http://www.reuters.com/article/2012/11/08/us-jpmorgan-settlement-mortgages-idUSBRE8A70WA20121108">From Reuters:</a></p>
<p style="padding-left: 30px;">One of the cases is related to disclosures by JPMorgan of delinquencies involving one mortgage-backed securitization. The other case is over multiple securitization done by <a class="hidden_link" href="http://www.businessinsider.com/blackboard/bear-stearns-inc">Bear Stearns</a>, the failed investment bank that JPMorgan took over in March 2008 during the financial crisis.</p>
<p style="padding-left: 30px;">The company faces numerous other government investigations and private lawsuits stemming from the financial crisis and from its $6.2 billion trading loss this year on credit derivatives.</p>
<p>On to the next.</p><p><a href="http://www.businessinsider.com/jp-morgan-pay-297-mill-sec-settlement-2012-11#comments">Join the conversation about this story &#187;</a></p> http://www.businessinsider.com/bank-of-americas-hustle-program-2012-10In Preet Bharara's Suit Against BofA, He Reveals A Program Called 'The Hustle'http://www.businessinsider.com/bank-of-americas-hustle-program-2012-10
Wed, 24 Oct 2012 12:59:00 -0400Linette Lopez
<p>U.S. District Attorney Preet Bharara just announced that he's filed a complaint against <a href="http://www.businessinsider.com/blackboard/bank-of-america" class="hidden_link">Bank of America</a> alleging that Countrywide, its mortgage unit, purposely defrauded <a href="http://www.businessinsider.com/blackboard/fannie-mae" class="hidden_link">Fannie Mae</a> and <a href="http://www.businessinsider.com/blackboard/freddie-mac" class="hidden_link">Freddie Mac</a>.</p>
<p>It all centers around something called "the Hustle," or (HSSL- High Speed Swim Lane) a strategy started in August of 2007 the D.A.'s office says Countrywide implemented in order to speed up the mortgage origination process.</p>
<p>From the complaint:</p>
<p><img src="http://static5.businessinsider.com/image/5088171269beddd112000006-672-228/the-hustle-complaint.png?maxX=576&amp;maxY=195" border="0" alt="the hustle complaint" width="576" height="195" /></p>
<p><img src="http://static4.businessinsider.com/image/5088172969bedd951000000e-650-80/the-hustle.png" border="0" alt="the hustle" width="552" height="67" /></p>
<p>The complaint goes on to allege that Countrywide was warned that this new process would result in loans of the poorest quality.</p>
<p>"Loans move forward, never backward," became a Countrywide motto after the Hustle, the D.A. alleges, and executives removed "toll gates" that were supposed to slow down and force underwriters to review loan applications that were processed through Countrywides automated loan approval system, CLUES.</p>
<p>For example, one property in Miami was approved with the information that the mortgage holder made over $15,000 a month, when if fact they made just over $2,6000. The loan defaulted within 7 months of closing.</p>
<p>Then there's the Alabama property where Countrywide allegedly failed to disclosed over $81,000 of debt held by the mortgage holder. to the GSEs.</p>
<p>Additionally, in order to boost the Hustle, Countrywide allegedly changed its compensation policy by giving out bonuses based on the quantity of loans originated, not on the quality of those loans.</p>
<p><img src="http://static2.businessinsider.com/image/50881b026bb3f73103000009-656-257/quantity-not-quality.png" border="0" alt="quantity not quality" width="558" height="217" /></p>
<p>At the same time, Countrywide told officials at Fannie and Freddie that they were tightening their review process to boost sales.</p>
<p><img src="http://static5.businessinsider.com/image/50881a7469beddc51b000001-634-114/fannie-freddie.png" border="0" alt="fannie freddie" width="563" height="101" /></p>
<p>When the GSEs found fraud in the loans, the complaint alleges, Countrywide purposely thwarted the repurchase process resulting in over $1 billion in unrepurchased loans on the GSE's books.</p>
<p><img src="http://static2.businessinsider.com/image/50881d326bb3f7c107000001-737-431/hustle.png" border="0" alt="hustle" width="549" height="321" /></p>
<p>So yeah, if you were thinking about that cheery disco song when you heard "hustle", you were thinking wrong.</p><p><a href="http://www.businessinsider.com/bank-of-americas-hustle-program-2012-10#comments">Join the conversation about this story &#187;</a></p> http://www.businessinsider.com/bank-of-america-sued-over-alleged-mortgage-fraud-2012-10Bank Of America Is Being Sued For $1 Billion Over Alleged Mortgage Fraudhttp://www.businessinsider.com/bank-of-america-sued-over-alleged-mortgage-fraud-2012-10
Wed, 24 Oct 2012 12:09:00 -0400Julia La Roche
<p><img style="float:right;" src="http://static5.businessinsider.com/image/4c8806037f8b9a503def0900-400-300/preet-bharara.jpg" border="0" alt="Preet Bharara" /></p><p>Preet Bharara, the U.S. attorney in Manhattan, is suing <a href="http://www.businessinsider.com/blackboard/bank-of-america" class="hidden_link">Bank of America</a> for over $1 billion mortgage fraud against <a href="http://www.businessinsider.com/blackboard/fannie-mae" class="hidden_link">Fannie Mae</a> and <a href="http://www.businessinsider.com/blackboard/freddie-mac" class="hidden_link">Freddie Mac</a>, <a href="http://www.justice.gov/usao/nys/pressreleases/October12/BankofAmericanSuit.php">according to a press release</a>. [via&nbsp;<a href="https://twitter.com/BloombergNews/status/261136290391683072">@BloombergNews</a>]</p>
<p>The complaint alleges that Countrywide allegedly started a fraudulent mortgage origination program called the "Hustle," which was "designed to sell defective loans" to Fannie and Freddie, the release said.</p>
<p>When BofA acquired Countrywide in 2008 during the financial crisis that "Hustle" program allegedly continued, according to the release.&nbsp;</p>
<p>From the <a href="http://www.justice.gov/usao/nys/pressreleases/October12/BankofAmericanSuit.php">release</a>&nbsp;(emphasis ours):&nbsp;</p>
<p style="padding-left: 30px;"><span>Specifically, the Complaint alleges that from at least 2007 through 2009, COUNTRYWIDE, and later BANK OF AMERICA after acquiring COUNTRYWIDE in 2008, implemented a new loan origination process called <strong>the &ldquo;Hustle,&rdquo; which was intentionally designed to process loans at high speed and without quality checkpoints, and which generated thousands of fraudulent and otherwise defective residential mortgage loans sold to Fannie Mae and Freddie Mac that later defaulted, causing over $1 billion dollars in losses and countless foreclosures.</strong></span></p>
<p><span><span>"As alleged, through a program aptly named &lsquo;the Hustle,&rsquo; Countrywide and Bank of America made disastrously bad loans and stuck taxpayers with the bill. As described, Countrywide and Bank of America systematically removed every check in favor of its own balance &ndash; they cast aside underwriters, eliminated quality controls, incentivized unqualified personnel to cut corners, and concealed the resulting defects. These toxic products were then sold to the government sponsored enterprises as good loans. This lawsuit should send another clear message that reckless lending practices will not be tolerated," Bharara said in a statement.&nbsp;</span></span></p>
<p><span><span>Shares of BofA were last up around 0.85% in mid-day trading.</span></span></p><p><a href="http://www.businessinsider.com/bank-of-america-sued-over-alleged-mortgage-fraud-2012-10#comments">Join the conversation about this story &#187;</a></p> http://www.businessinsider.com/us-files-mortgage-fraud-suit-wells-fargo-2012-10The US Has Filed A Civil Suit Against Wells Fargo For Alleged Mortgage Fraudhttp://www.businessinsider.com/us-files-mortgage-fraud-suit-wells-fargo-2012-10
Tue, 09 Oct 2012 15:20:00 -0400Linette Lopez and Michael Kaplan
<p><img style="float:right;" src="http://static1.businessinsider.com/image/50747bc36bb3f7fe77000000/wells-fargo-stock.png" border="0" alt="wells fargo stock" style="float: right;" /></p><p>The U.S. government has filed a civil suit for mortgage fraud against <a class="hidden_link" href="http://www.businessinsider.com/blackboard/wells-fargo">Wells Fargo</a>.</p>
<p>Charges of misconduct span more than a decade and stem from the bank's participation in a Federal Housing Administration Program, according to a statement from&nbsp;the U.S. Attorney in Manhattan.&nbsp;</p>
<p>According to the complaint, the FHA paid millions on insurance claims for thousands of loans issued through a special lender program as a result of false certifications by the bank.&nbsp;</p>
<p>Wells Fargo denied the allegations and said in a statement that "it acted in good faith and in compliance" with FHA and Department of Housing and Urban Development rules.</p>
<p>The company's stock price has dropped on initial news of the lawsuit, but has bounced back slightly since. Still, it's down 1.45% a<span>s of 4:15 p.m. Tuesday.</span></p>
<p>(via <a href="http://www.bloomberg.com/news/2012-10-09/u-s-files-civil-mortgage-fraud-suit-against-wells-fargo.html">Bloomberg</a>)</p><p><a href="http://www.businessinsider.com/us-files-mortgage-fraud-suit-wells-fargo-2012-10#comments">Join the conversation about this story &#187;</a></p>